Cross Border Insolvency
• Cross-Border insolvency a necessity to deal with insolvent debtors with assets over several jurisdictions. It shall aid with the insolvency process for several Indian multinational with subsidiaries and assets in foreign jurisdictions and undergoing insolvency process.
• Essential to improved credit recovery rate, information exchange without delay, empowering insolvency representatives and remedy in foreign jurisdictions.
Need for a law on Cross-Border Insolvency?
• UNCITRAL Model Law on Cross-Border Insolvency has been issued by UNCITRAL to assist states in relation to the regulation of corporate insolvency and financial distress involving companies which have assets or or creditors in more than one state.
• The Model law has been widely recognised and adopted by more than 44 countries including USA, U.K. and Singapore.
• Ministry of Company Affairs, India has released Draft chapter on Cross border Insolvency based on the UNCITRAL Model Law- Salient aspects:
- Applicability to Corporate Debtor in relation to foreign insolvency proceedings, Indian insolvency proceedings, concurrent insolvency proceedings and foreign creditors having interest in commencement of Indian insolvency proceedings where assistance is sought in a state by foreign court
- Provision for creditors in a foreign state on equal footing with domestic creditors, recognized rights of foreign representatives, recognition of foreign proceedings in relation to corporate debtor, recognition of orders passed by the foreign court
Jet Airways to become first Indian company to undergo Cross Border Insolvency proceedings 18 Oct 2019, IANS
New Delhi: In a major breakthrough for India's insolvency mechanism which is still in its evolving stage, Jet Airways would be the first Indian company to undergo insolvency proceedings under the Cross Border Insolvency Protocol along with the Insolvency and Bankruptcy Code (IBC) of India.
(NCLAT) allowed the Dutch court administrator of Jet Airways to attend the meetings of the bankrupt airline's Committee of Creditors (CoC). Dutch Trustee (Administrator) will work in cooperation with the 'Resolution Professional of India’ as per the 'Cross Border Insolvency Protocol’.
NCLT orders inclusion of Videocon's overseas assets in insolvency:
Videocon was in the first list of the 12 largest accounts that the Reserve Bank of India referred for bankruptcy in late 2016 February 15, 2020 https://www.business-standard.com/article/companies/nclt-orders-inclusion-of-videocon-s-overseas-assets-ininsolvency-120021500036_1.html The National Company Law Tribunal (NCLT) has ordered the inclusion of Videocon Industries’ overseas oil and gas business in the ongoing insolvency process being conducted in the country.
Videocon was in the first list of the 12 largest accounts that the Reserve Bank of India referred for bankruptcy in late 2016. The diversified group owes collectively over Rs 1 trillion to lenders.
“…..there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as a single economic entity,” the NCLT has said.
“... we have concluded that foreign oil and gas assets of the group held through VOVL, VHHL, VEBL and VINI, are in fact, the assets and property of VIL…. Therefore, the assets held by them can be said to be ‘its’ assets, which is under the insolvency,” the order noted.
VIL’s overseas oil and gas companies are VOVL, Videocon Hydrocarbon Holdings, Videocon Energy Brasil), Videocon Indonesia Nunukan Inc.
The tribunal also directed the resolution professional to include the assets, liabilities, claims of the above mentioned overseas assets, companies in the information memorandum of Videocon.
The two-member Bench comprising Suchitra Kanuparthi and Chandra Bhan Singh allowed a moratorium on the foreign petroleum assets of the group which will restrain its lenders from selling the conglomerate’s overseas assets.
MCA panel’s scope on crossborder insolvency gets bigger
March 08, 2020 https://www.thehindubusinessline.com/companies/mcapanels-scope-on-cross-border-insolvency-gets-bigger/article31015843.ece
Committee to study UCITRAL Model Law on ‘Enterprise Group Insolvency’ The scope of work for the committee constituted to recommend rules and regulatory framework for the smooth implementation of cross-border insolvency provisions under the Insolvency Bankruptcy Code just got bigger. The Ministry of Corporate Affairs (MCA) has now expanded the terms of reference of this panel headed by retired IAS officer KP Krishnan to cover aspects relating to enterprise group insolvency on a cross-border basis.
This committee, which was constituted in the third week of January this year, will now also study and analyse the Uncitral Model Law for ‘enterprise group insolvency’ and make recommendations in the context of the Insolvency and Bankruptcy Code 2016 (IBC), official sources said.
APPLICABILITY OF CROSSBORDER REGIME
The Code provides the Adjudicating Authority with the power to refusal to take any action for implementation which in its opinion, ought to be manifestly contrary to the public policy of India.
A foreign representative has to apply to the adjudicating authority. The foreign representative shall be bound to follow the code of conduct as may be notified. An application pursuant to this Part is made to the Adjudicating Authority by a foreign representative does not subject the foreign representative or the foreign assets and affairs of the corporate debtor to the jurisdiction of courts in India, or the Adjudicating Authority, for any purpose other than the application.
Penalty provisions for the foreign representatives when any loss of amount or unlawful gain on behalf of the foreign representative takes place.